An estimation of fuel demand elasticities for Spain: an aggregated panel approach accounting for diesel share

Abstract

In this paper an econometric analysis of transport fuel demand elasticities is presented for Spain, based on aggregate panel data. A particular emphasis is given to the impact of diesel share on all transport fuels demand. Estimation results are then used in a simulation exercise for two tax reforms suggested by recent documents of the European Commission. Results show a signicant impact of the share of diesel powered vehicles when considering the specic gasoline and diesel demand but the same does not hold when considering the total fuel demand,where the impact is much lower. The simulated tax reforms show little savings coming from thenal price changes of the oil products, due to their small price elasticities. On the long run, results, although much more disperse, show a much larger impact on fuel demand and on CO2 emissions.